Contract Modifications & Switching

There are a number of reasons for modifying a contract, which could include terminating the contract and awarding to a new contractor. Prior to taking any action, the stakeholders should consult all issues with a Contracting Officer/Contract Specialist or Acquisition Expert.

Useful Terminology

Contracting Officer (CO)

The only person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings. A CO’s authority comes in the form of a warrant.

Warrant

To act as a contracting officer, you must have a warrant, which is a certificate that identifies the holder as having the power to make contracts valued at up to a certain amount. The warrant makes you the only person who can legally bind the unit to a contract. Warrants levels include: Basic, Simplified Acquisition, Intermediate, Senior/Unlimited.

Contract Specialist (CS)

In charge of drafting contracts and negotiating prices between the parties involved. These professionals may also resolve disputes between contractors and government agencies, evaluate bids, cancel or modify contracts with the assistance of a CO, and maintain relationships with vendors. CS’s are sometimes in the process of becoming a CO, but may also hold limited warrants.

Modifications

Types of contract modifications include bilateral and unilateral.

Bilateral

A supplemental agreement signed by the contractor and the contracting officer, and are used to-

(1) Make negotiated equitable adjustments resulting from the issuance of a change order;

(2) Definitize letter contracts; and

(3) Reflect other agreements of the parties modifying the terms of contracts.

Unilateral

A contract modification is signed only by the contracting officer, and are used to-

(1) Make administrative changes;

(2) Issue change orders;

(3) Make changes authorized by clauses other than a changes clause (e.g., Property clause,

Options clause, or Suspension of Work clause); and

(4) Issue termination notices.

The importance of having a modification process in place cannot be overstated. A good practice for handling unforeseen modifications effectively should follow these principles:

• Only changes that are within the general scope of the original contract should be accepted;

• Changes should be in accordance with the terms of the contract;

• Only changes that are due to legitimate unforeseen circumstances should be allowed;

• Written determination should be required prior to modifying the contract;

• Any changes need to be evaluated in terms of the impact on the scope, schedule and budget;

• Formal, written approval of all changes should be required prior to executing the modification.

The CO is the only person with the authority to modify a contract; therefore, the modification process must go through a procurement office. Depending on contract complexity and the type of contract modification, the CO may request legal counsel to review prior to actually signing the modification.

To protect the government and the contractor, contract provisions and clauses are included in the original award. The provisions and clauses address things such as changes in contract prices, time of performance, extension and renewals, or other terms deemed appropriate. Provisions and clauses are regulated by the Federal Acquisition Regulations.

Modifications that include changes can require more administrative work for the contracting office. CO’s and CS’s are generally work on a number of different contracts at the same time. The amount of time required to award a modification depends on a number of things:

• Does the CO have a Contract Specialist (CS)?

  • Not all CO’s have the luxury of having a CS

  • CS’s are a huge resource for CO’s, and help prepare all the required documents.

  • Required documents can be: Revised SOW, Revised IGCE, Required Memo’s to File

• Have documents showing all the changes been provided to the CO/CS?

  • Using ‘Track Changes’ to clearly reflect the changes in the SOW helps save time

  • Providing a IGCE showing changes to cost, including labor categories

• Bilateral modifications must be negotiated with the contractor—which requires time to discuss all changes with all the key players?

• Outside the CO and CS, what other type of reviews will be required?

  • Head of Contracting

  • Legal

  • Other stakeholders

Transition Plan

Most contracts include a transition plan in case the incumbent, for whatever reason, stops working on the contract. The transition plan lays out the timing of the transition, tasks and roles the incumbent is required to complete, and what information they are required to share and how they will share.

Things to verify in the transition plan:

• Does it specify the amount of time the incumbent has to complete the transition?

• Is there an overlap between the current contract and the newly awarded contract?

• Does the plan describe how the incumbent will transfer knowledge and/or data?

• Is there a cost associated with transitioning?

Terminations

Procurement offices may have written guidance for contract disputes and escalation procedures, and the CO will help guide the entire process.

There are several types of terminations:

• Termination for Cause (T4C) - this allows the Government to “unilaterally” terminate a contract when such action is determined to be in the best interest of the Government. Prior to termination, the government will negotiate with the vendor to agree on all the work completed, and the government must pay the contractor for that work.

• Termination for Default (T4D) - due to failure to perform, failure to deliver on time, or failure to comply with other terms and conditions of the contract. Prior to terminating a contract for default, the CO will send a cure notice to the contractor. If the contractor fails to remedy the contract deficiencies identified in the cure notice, the contract may be terminated.

Sub-Contractors

Prime contractors work directly with the government. Unlike prime contractors, subcontractors do not work directly with the government, but instead work for other contractors. The prime is responsible for managing any subcontractors, and are responsible for ensuring that the work is completed as defined in the contract.

Most federal statutes and regulations do not apply to subcontractors because the federal government and subcontractors generally lack "privity of contract" – a direct contractual relationship.

To ensure the subcontractor is managed properly, the prime contractor should attend all meetings that involve the subcontractor, and in general, the government should not direct the subcontractor to complete any work.